Wells Fargo’s latest earnings report shows the bank continues to struggle with its fake accounts scandal, which began back in 2016.
The bank has continually put forth efforts to move past its fake accounts scandal, for which it received a $185 million fine by the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency, with its new advertising campaign featuring the slogan, “Established in 1952, reestablished in 2018.” However, even just last quarter, the bank continued to announce new fines levied against it for yet more bank scandals.
In the first quarter, Wells Fargo confirmed that it was facing a $1 billion fine over its mortgage lending and auto insurance abuses. To no one’s surprise, this fine weighed heavily against the bank’s first-quarter earnings.
And now, the latest earnings report showed these scandals continued to weigh on the bank’s earnings in the second quarter this year.
Wells Fargo reported its revenue slipped further, falling to $21.6 billion. This is down from $21.9 billion in the first quarter and $22.2 billion in the second quarter of 2017.
The company’s net income, while up slightly from $5.14 billion in the first quarter of 2018, remained down from $5.86 billion in the second quarter of 2017 with its reported net income of $5.19 billion in the second quarter this year. Diluted earnings per common share came in at $0.98, up from $0.96 in the first quarter but down from $1.08 last year.
This fell below the general estimates that the bank would increase its earnings per share by 5% to $1.12. But the bank’s revenue fell closer in line as forecasts showed it would see a 3% drop in revenue to $21.57 billion.
The bank pointed out that despite its decreases from last quarter or even last year, it recently passed its stress test, and plans to give more money back to shareholders over the coming year.
“I’m also pleased with our recent CCAR results, which demonstrates the strength of our diversified business model, our sound financial risk management practices, and our strong capital position, and enables us to return more capital to our shareholders in alignment with our goal of creating long-term shareholder value,” Wells Fargo CEO Tim Sloan said.
The bank’s mortgage banking income fell considerably, coming in at $770 million, down from $934 million in the first quarter of 2018.
But while its banking income decreased, possibly due to the rising costs to originate a mortgage, residential mortgage loan originations increased to $50 billion in the second quarter, up from $43 billion in originations in the first quarter.
The bank explained that the production margin on residential held-for-sale mortgage loan originations decreased to 0.77%, compared to 0.94% in the first quarter due to increased price competition.
Net mortgage servicing income fell to $406 million in the second quarter, down from $468 million in the first quarter this year. Wells Fargo explained the decrease was driven by higher loan prepayments.
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